Chicago PMI … Momentum Trading DOW Stocks & ETFs … Stock Market Analysis

 
“Trade what you see; not what you think.” – The Old Fool, Richard McCranie, trader extraordinaire.
 
“Far more money has been lost by investors in preparing for corrections, or anticipating corrections, than has been lost in the corrections themselves.” - Peter Lynch, former manager of Fidelity’s Magellan® fund.
 
“Never, never, never, believe any war will be smooth and easy, or that anyone who embarks on that strange voyage can measure the tides and hurricanes he will encounter. The Statesman who yields to war fever . . . is no longer the master of policy but the slave of unforeseeable and uncontrollable events.” - Winston Churchill.
 
CHICAGO PMI (INDEXBOX)
“The Chicago Purchasing Managers Index has declined, indicating a slowdown in manufacturing activity across the Chicago region, according to Investing.com. The index registered 55.3, below the forecast of 55.8 and down from the prior month's reading of 58.8. The reading remains above the 50 level that separates expansion from contraction, so the data point to continued growth at a slower pace rather than an outright contraction.” Story at: https://www.indexbox.io/blog/chicago-pmi-falls-to-553-missing-forecast-and-signaling-slower-manufacturing-growth/
 
QUICK MARKET SUMMARY
-Friday the S&P 500 declined about 1.8% to 7580.
-VIX rose about 13% to 19.42.
-The yield on the 10-year Treasury rose to 4.933% (compared to about this time most recent trading day).
 
MY TRADING POSITIONS
NVDA – Added 12/1/2025, 2/6/2026 & 8/3/2026. Reduced position 10/7/2021
XLK – Added 6/5/2026.
 
CURRENT SUMMARY OF APPROXIMATELY 50 INDICATORS:
At the close today, of the 50-Indicators I track, 16 gave Bear-signs and 10 were Bullish. The rest are neutral. (It is normal to have a lot of neutral indicators since many of the indicators are top or bottom indicators that will signal only at extremes.)
 

TODAY’S COMMENT
The daily, bull-bear spread of 50-indicators declined from +2 to -6 (6 More Bull indicators than Bear indicators), a BEARISH indication. I consider +5 to -5 the neutral zone. The 10-dMA curve of the spread (purple on the chart above) that smooths daily fluctuations, is reversed lower, a BEARISH sign.
 
Looks like my concerns from yesterday were well founded. The weak earnings from Intel, Google and Amazon Thursday were enough to rattle markets and led to Friday’s selloff.  I was busy today and didn’t follow the market as I had planned; I made no moves in stocks.
 
But I am glad I sold my QLD position and most of my NVDA positions 3-weeks ago.
 
Where is the S&P 500?
          - 3.3% below its all-time high
          - 1.8% below its 50-dMA
          - 0.8% below its 100-dMA
          - 3.4% above its 200-dMA
 
That 200-dMA is a point of strong support so that would be a reasonable place for this decline to end. As of now, it looks like we are in a correction; it is not over yet. Volumes Friday were higher than prior lows suggesting increasing fear.
 
There were some bull signs:
Only 46 days in the last 100 have been up. That’s a long-term bullish sign, but it is not a very timely indicator.  It was a month early in calling the bottom of the 25% decline in October of 2022.
 
Bollinger Bands are oversold/bullish. RSI is nearly oversold, but not there yet. By those standards a bottom could be near.  That would fit with a drop to the 200-dMA. That is around the 29 July low at 7316.    We’ll need to see what happens next week. Do indicators improve?

There is always the worry that this correction could fall more than 10%. That was the signal we got at the recent all-time high.
 
BOTTOM LINE
I’m Bearish short-term. With an expectation that the decline may only be another 3% or so lower, I am not planning to lower stock holdings; but I suppose further large price declines could cause me to re-evaluate.
 
ETF - MOMENTUM ANALYSIS:
TODAY’S RANKING OF 15 ETFs (Ranked Daily) ETF ranking follows:
 

The top ranked ETF receives 100%. The rest are then ranked based on their momentum relative to the leading ETF.
*For additional background on the ETF ranking system see NTSM Page at…
http://navigatethestockmarket.blogspot.com/p/exchange-traded-funds-etf-ranking.html
 
DOW STOCKS - TODAY’S MOMENTUM RANKING OF THE DOW 30 STOCKS (Ranked Daily)

The top ranked Stock receives 100%. The rest are then ranked based on their momentum relative to the leading Stock.
For more details, see NTSM Page at…
https://navigatethestockmarket.blogspot.com/p/a-system-for-trading-dow-30-stocks-my_8.html
 
FRIDAY MARKET INTERNALS (NYSE DATA)-

My basket of Market Internals declined to HOLD. (My basket of Market Internals is a decent trend-following analysis that is most useful when it diverges from the Index.) 
 
                                                                         

My invested position is about 55% stocks, including stock mutual funds and ETFs. 50% invested in stocks is a normal, conservative position for a retiree. (80% is my max stock allocation when I am confident that markets will continue higher; 30% in stocks is my Bear market position.)
                                              
I trade about 15-20% of the total portfolio using the momentum-based analysis I provide here although I don’t trade as much as I used to. When I see bullish signs, I add a lot more stocks to the portfolio, usually by using an S&P 500 ETF as I did back in October 2022 and 2023.